American Economic Journal:
Microeconomics
ISSN 1945-7669 (Print) | ISSN 1945-7685 (Online)
Experience Goods and Consumer Search
American Economic Journal: Microeconomics
vol. 14,
no. 3, August 2022
(pp. 591–621)
Abstract
We introduce a search model where products differ in horizontal attributes and unobserved quality ("experience goods"), and firms can establish quality reputation. We show that the inability of consumers to observe quality before purchase significantly changes how search frictions affect market performance. In equilibrium, higher search costs reduce match values and increase price but can boost firms' investment in product quality. Under plausible conditions, both consumer and total welfare initially increase in search cost, whereas both would monotonically decrease if quality were observable from search. We apply the analysis to online markets, where low search costs coexist with low-quality products.Citation
Chen, Yongmin, Zhuozheng Li, and Tianle Zhang. 2022. "Experience Goods and Consumer Search." American Economic Journal: Microeconomics, 14 (3): 591–621. DOI: 10.1257/mic.20200070Additional Materials
JEL Classification
- D11 Consumer Economics: Theory
- D21 Firm Behavior: Theory
- D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
- L15 Information and Product Quality; Standardization and Compatibility
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